Why Making Tax Digital is so stupid

chrismac1

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Yet again an error message from the database when trying to log on. The availability of the database has been lousy over the past 2 months, whichever tax you are trying to use. VAT, PAYE, self-assessment, CIS, corporation tax. There have been significant downtime issues with all of them.


And these numpties think it can cope with 6 returns per year for self-assessment instead of just 1!

Victor_the_Gink

6am on a bank holiday - go for a walk or something. I also don't think much of HMRC but it's not healthy to let it consume you like this.

Pennywise

Victor_the_Gink wrote: »

6am on a bank holiday - go for a walk or something. I also don't think much of HMRC but it's not healthy to let it consume you like this.

I don't think you understand self-employment. I'm also an accountant, and it's simply not a 48 weeks of the year, 9-5 job. The peaks and troughs of work can be huge. If HMRC systems were only available for "normal" working hours, they'd be in complete meltdown most of the year. A lot of people use HMRC systems outside normal working hours simply because you're more likely to get successful submissions - at peak times, their systems constantly crash.

chrismac1

Thanks Pennywise that is exactly why I was using the HMRC system on a bank holiday. It was down at a peak time last week when I previously tried to de-register this client for VAT. In the end I got it done today when it finally could be bothered to function.

chrismac1

HMRC is very far from consuming me Victor. Dealing with them, however, is by a landslide the worst part of my job. I Throughout my career I have struggled to deal with incompetent or arrogant people and HMRC recruits senior managers who are both incompetent and arrogant.

dori2o

chrismac1 wrote: »

HMRC is very far from consuming me Victor. Dealing with them, however, is by a landslide the worst part of my job. I Throughout my career I have struggled to deal with incompetent or arrogant people and HMRC recruits senior managers who are both incompetent and arrogant.

Sounds very much like some of the accountants I've dealt with.

chrismac1

On the contrary MTD, like Fred Goodwin at RBS 10 years ago, is a classic example of "Captain Smith" syndrome.

Any number of people have provided the MTD team serious warnings that they have their ship steering full speed towards an icefield. But the more flaws and errors are pointed out in their strategy, the more dismal database performance is highlighted by users, the more entrenched the MTD team become in their desire to call down to the engine room and ask for more coal in the boilers.

From their point of view, it is better to crash the entire UK tax system into chaos than admit that they have their ship heading towards a sinking.

Read "Black Box Thinking" by Syed or similar books analysing the hideous, totally avoidable blunders made in worlwide healthcare and numerous other fields to learn more about the dangerous mindset operating at HMRC towers.

dori2o

chrismac1 wrote: »

On the contrary MTD, like Fred Goodwin at RBS 10 years ago, is a classic example of "Captain Smith" syndrome.

Any number of people have provided the MTD team serious warnings that they have their ship steering full speed towards an icefield. But the more flaws and errors are pointed out in their strategy, the more dismal database performance is highlighted by users, the more entrenched the MTD team become in their desire to call down to the engine room and ask for more coal in the boilers.

From their point of view, it is better to crash the entire UK tax system into chaos than admit that they have their ship heading towards a sinking.

Read "Black Box Thinking" by Syed or similar books analysing the hideous, totally avoidable blunders made in worlwide healthcare and numerous other fields to learn more about the dangerous mindset operating at HMRC towers.

At the end of the day it's not my place to agree or disagree with the changes that are being made. I only work for them on the front line, I'm not a part of any decision making process.

Part of the problem though, in my lowly opinion, as is the case in most other Government departments, is that these computer systems are designed and developed by 3rd party companies. Unlike in the past where they were developed in house.

Whilst some people may suggest that the best people to build computer programmes are computer programmers, the problem is that for things which can be quite complicated, like tax, should in my opinion have significant input from the people who have to use and respond to these systems, such as those people like me on the front line, and accountants.

The problem comes because of the vast sums of money that these 3rd parties charge to make changes to the systems they design.

For example, I made a suggestion to improve the reconciliation process on the NPS system. To allow a free text box to be included which would show on the P800, which would allow explanations of why a taxpayer has over/underpaid, why certain reliefs etc have been refused/accepted, requesting additional information etc.

The idea was rejected because of costs, with a suggestion that it would cost in excess of £10k to change an existing box on the system which.is limited to 47 characters into a free text box with no limit to type or number of characters.

Had this service been developed in house, with government employed computer programmers (potentially employed across Government rather than for each department), with licences fully available, then costs would be limited only to the salary of those who make the necessary changes.

This prevents all departments from resolving issues in the shortest possible time as they remain at the mercy of 3rd party companies.

I personally think the idea of MTD is good. There is no reason why those who are self employed should not have to become more aware of how basic accounting works, and whilst it may need 5 or 6 submissions it will only require the person to log in 4 times as submissions 1 and 2 would be done together for period 1, and submission 5 and 6 will be done together at the end of period 4.

For those in the CIS its expected that their income/deductions will be pre populated from the information already held, just as paye income/tax is pre-populated on the online SA tax return.

As for the potential associated cost of software, unfortunately being in business always requires some form of financial outlay. Thats just a fact of life.

chrismac1

Well at least we can both agree that Captain Smith is bloody stupid to place so much reliance on third party software providers. That in no way alters the position of the iceberg and the speed of the ship unfortunately.

6 tax returns per year, how stupid is that?

dori2o

chrismac1 wrote: »

Well at least we can both agree that Captain Smith is bloody stupid to place so much reliance on third party software providers. That in no way alters the position of the iceberg and the speed of the ship unfortunately.

6 tax returns per year, how stupid is that?

What doesnt help is the mistruths that certain people spread to strengthen their argument.

It isnt 6 tax returns per year, it's 6 submissions, one of which is simply a button press to confirm that the information held is correct and complete, giving people one final chance to review, and if necessary amend, what has already been submitted over the previous 4 accounting periods, and will be available to submit at the same time as submitting the final figures.

Scaremongering will do nothing but make people even more wary and worried of the system.

What you have not mentioned in any of your posts is who will be expected to sumbit via this new system.

From April 2018, only those small businesses, landlords and self employed with a turnover in excess of the VAT limit will be required to file by MTD.

From April 2019 those small businesses, landlords and self employed with a turnover over £10k will have to file.

April 2020 – corporations and partnerships with turnover above £10m

Those with turnovers, 2nd incomes where no tax is deducted of less than £10k will be exempt and will be dealt with via Simple Assessment, with the income/expenses possibly being notified via the Personal Tax Account, or via a simplified self assessment system.

They will, if they wish, be able to volunteer for MTD if they dont meet the criteria for mandatory submissions.

Those who currently file self assessments only because their income is over £100k, and where it is all PAYE income, and those in receipt of state pension where it is in excess of the personal allowance but they have insufficient other income to collect the tax from, will also be removed from SA and dealt with via Simple Assessment or a simplified self assessment system

Those who are self employed and work under the Construction industry scheme will see that their income received under the CIS, and the deductions made from it will be pre-populated into the MTD system.

For these people that means they simply have to input the value of their expenses.

There will be no requirement to make any accounting adjustments at all in the 4 quaterly submissions if the business/individual doesnt want to. They can simply log in, enter trading income/land and property income on their digital records (confirm the income is correct if HMRXC already hold it I.e. CIS), press a button to confirm the quaterly submission, and then make all adjustments and show other income on the final submission, which will have to be submitted on/before 31 January following the end of the tax year, the same as the tax returns are now. Although it will also be possible to do this at the same time as submittingthe Q4 submissions where their accounting period runs in line with the tax year.

The penalty regime will also change.

Although these have not yet been finalised its possible these could follow a similar line to the current VAT penalty process but adopting a points based system, where penalties are charged when a points threshold is triggered and also based on a percentage of the tax due rather than a fixed amount.

The consultation for this is still open and closes on 11 June 2017.

There will also be concessions made for those truly unable to use MTD, with these people continuing to use a Self Assessment service

As an accountant you have a duty to advise on the facts, currently I'd suggest that your blinding hatred for HMRC leaves your opinions on the borderline of fact and fiction.

There are also other benefits to this.

HMRC advisers get a lot of requests for copies of tax calculations in order for people to obtain finance (loans/mortgages), after MTD goes live people will be able to provide this information much easier by providing reports from their own accounts which will give a much more up to date view of their income/expenditure, and wont have to wait for upto 10 days to receive the copies of their SA302's.

People will be able to better understand their finances. It's quite frankly amazing how many people I speak to who have no idea of what their income is, both employed and self employed.

By having to update their accounts quaterly it should mean an end to the 'shopping bag' accounting that many accountants fear come December/January.

Cash basis accounting limits will be extended.

I also expect (my opinion only) that this will also extend into through the year income reporting for purposes of Tax Credits/Universal Credit, just as is the case currently with employed claimants, where RTI data from PAYE records automatically adjusting estimated income details for Tax Credit/Universal Credit claimants. This should lead to a reduction in overpayments paid to these claimants, reducing costs for HMRC in respect of recovery of overpaid awards, and in respect of fraudulent claims and annual income declarations where people under-report their income to Tax Credits office/Universal Credit (DWP).

chrismac1

My definition of a tax return is as follows:

"A tax return is a mandatory submission to a tax authority, which may result in a penalty if incorrectly submitted or submitted after a given deadline."

To the best of my belief that makes it 6 tax returns per year.

I do not hate HMRC blindly. When I set up in practice 8 years ago I had a great deal of respect for the UK tax authorities. Unfortunately this was based on my prior experience of them which was back in the 1990s.

Blundering incompetence and spiteful and wilful pursuit of tax charges which only arose because of that incompetence, plus the pursuit of stupid strategies such as MTD, have totally eroded that respect.